8. Analysits of a replacement project A. Limes frms nil need to decide if they want to centinue to use their ourrent equiprment ar replace the equipment with nemer equipment. The eempary mill feed to do meplacenten analysis to desermine ahich option is the best financial decision for the cerpary. Levwass Co. is considering replacing an existing piece of equipment. The project involves the folowing: - The few equipment nill have a cost of 59,000,000, and it nil be cepreciated on a straight-ine basis over a period of six yeara fyears t=6y - The old machine is also being depreciated on a straight-Ine basis. It has a book value of $200,000 (at year of and four more years of depredation left (\$50, Co0 per year). - The hew equipmert nill have a salvage value of $0 at the end of the projectsi life frear 5 ;- The old machine has a current salvage value \{at year of of $300,600. - foeplacing the old machne wil require an investment in net working capital (NWWC) of $60,000 thac all be recever bd at the end of the project's Ife (year 6). - The hew machine is more efficent, so the firm's incrercenal earnings before interest and taxes (EaIT) nill inorease by a total of $600,000 in each of the fext six years (years 15 ). Hint. This value represents the difference besweben the revenues and operacifg casts finclucing depreciation expensej generated using the few equipment and that earned using, the old eq-ipment. - The project's cost of eapital is 1346. - The company's annual tax race is 30%. Complete the folowing table and compute the incremental cah foms associated with the replacemert of the old equigmerk akh the fen equigrient. The net present value (NPV) of this replacement project is: $6,127,119$4,528,740$6,393,516$5,327,930